The Stored Value Industry, which is most commonly known as the Gift Card Industry and Prepaid Calling Card Industry, as it exists today, is estimated to be a $60 billion a year industry. It is also estimated there are 1.5 billion individual plastic cards produced annually in order to facilitate this industry. The Stored Value industry markets products to consumers under some very recognizable names such as Gift Card, Prepaid Calling Card, Shopping Card, Merchandise Card, Spending Card, and Shopping Card, all of which are known in the industry as Stored Value Cards. It should also be noted that some merchants are moving away from any of these commonly known names and calling them just their cards. A real world example of this is the “Starbucks Card”.
Currently merchants that offer Stored Value Cards do not charge or allocate a fee for the cost of the card production, nor do they charge for any associated packaging such as envelopes that include their brand name or any other gift giving occasion themes, but allocating a fee for such value added items could solve a serious problem for these merchants as described below.
This industry presents a very unique situation in that because the original purchase of the Stored Value Card is technically a pre-paid purchase for a good or service, many cards never get redeemed for products or services while many others only get redeemed for a portion of their full value. The difference between what a consumer originally pays for a Stored Value Card purchase and what is actually redeemed is considered unclaimed property by many States. Industry experts estimate that 10% of the annual $60 billion Stored Value Card purchases go unclaimed. At the time of this writing, approximately 35 State governments mandate by law that this unclaimed property (that part not redeemed) be returned to the state. This is known as escheatment.
Presently the sales of Stored Value Cards are promoted, marketed and sold as a very simple and stand alone transaction at the consumer point of purchase (POP) level as well as the online environment. For instance, if an individual desires to purchase a $100.00 Stored Value Card, they simply give the merchant $100.00 for this purchase. This type of “value for value” transaction is typical and commonplace as it would not make sense for a merchant to discount the sale of a Stored Value Card to the general public as it would only result in the merchant trading a value in return for a lesser value. Additionally, as it exists today Stored Value Cards are typically marketed as a stand alone product without any other accompanying tangible or intangible product.
The problem with the above described methodology is that the “value for value” transaction lends itself to the required escheatment for the reason described above, that is the unredeemed amount is considered unclaimed and abandoned property. The invention as described below outlines a method and process that will make it feasible and legal for merchants to not escheat any unredeemed Stored Value Card monies as required by law. This problem has been recently discussed in much of the recent accounting press such as Price Waterhouse Coopers' QuickBrief!, Volume 2, Issue 7, December 2004, “Issues Surrounding the Recognition of Gift Card Sales and Escheat Liabilities”. Also, Loeb & Loeb, LLP discussed the problem in an article called “Found Money” in PROMO Magazine, Nov. 1, 2002. In a conference-held Jun. 2-3, 2004 by the Federal Reserve Bank of Philadelphia titled “Prepaid Cards: How Do They Function? How Are They Regulated?” this matter was discussed at length as shown in the conference summary. All these articles and conferences discuss the problem and the administration issues to comply with the various State laws, but none have presented the novel solution as disclosed in the present application.